Sunday, August 15, 2010

Winners and Losers

Whenever the government intervenes in the economy to help someone, it must also hurt someone. If it gives money to bail out the stockholders and unions at GM, taxpayers must be hurt to fund the rescue. Borrowing the cash postpones the hurt to future generations who can’t vote now, so that is usually very popular with politicians on both sides of the aisle. But government borrowing, like government taxes sucks the air out of the economy, as that money isn’t there to expand businesses and develop jobs in the private sector.

When government helps dairy farmers, it hurts those of us who buy milk and cheese. The poor are hurt worst, because they can afford it less, but since they are economically ignorant, they vote for the politicians who robbed them to help dairy farmers—often big agribusiness—who are paying attention and have lobbyists. There are myriad other examples where the government makes some people winners in the economy at the expense of others, from price supports to tariff and trade barriers.

Often put in place to help favored unions or politically-contributing industries, tariffs drive up prices for the rest of us, with the government deciding we are the economic losers so the connected can be winners. They also push other countries to erect trade barriers, which means fewer exports and lost jobs in exporting industries. The Smoot-Hawley tariff, signed into law by Hoover over the objections of 1,000 economists who wrote the White House, created a trade war that collapsed international trade and turned a recession into the Great Depression. But since most folks are economically ignorant, it was doubtless cheered by people who it put in soup lines. Democrats said Hoover was a “do-nothing president.” If only.

Raising taxes on the rich doesn’t make just them losers. They would have done something else with that money. If they put it in the bank, the bank would have lent it to people wanting to buy house or start businesses, so some home builders or small business employees are out of work. If they would have spent it on a new car or house, same result. The people who make those things don’t have jobs, because the money went to the government. And the rich aren’t the ones who have to tighten their belts.

Sure, the government spends those dollars, but too much is siphoned off to support higher government salaries and bureaucracy—or to pay the interest on past vote buying sprees.

I thought of all this because of a funny bumper sticker I saw, “Bail Out Studebaker.” Why not? We could reestablish all the failed businesses, at taxpayer expense? They and their employees would be winners, the rest of us losers.

And why are some companies “too big to fail”? Because they impact the economy more? Sure, but if one person loses a job, he or she is hurt as much as each of the thousands who lose jobs when big companies fail. That one job loss impacts the economy, too, and would be a lot cheaper to save. Especially when you look at some of the costs of “saving a job” under the various bailouts and stimulus programs.

When my dad married my step mom, Dotty Gray, I gained two terrific grandparents in the deal, George and Edith Gray. There was a family story that George was approached by some guys at work, who were starting a company in a garage in Camden, NJ, and wanted him in. He talked it over with Edith, and they decided, with three kids, to stick with the established company. So he didn’t join what the guys called the “Victor Talking Machine Company,” later RCA.

The company Pop Pop Gray stuck with made gas lanterns. I don’t suppose they are around today. But the government could have stepped in and outlawed the production of electric lights to “protect” Pop Pop’s job. They could have outlawed cars to protect buggy whip and carriage makers. And so on.

Former Senator and almost VP John Edwards (D-Adultery) used to whine about the loss of textile jobs in NC when they fled overseas, seeking lower wages. His mansion was almost flooded with his tears for the suffering unemployed poor. But he shed nary a tear for workers in New England who lost jobs when those same textile mills moved to North Carolina for cheaper labor.

Government can only make winners in the economy by making losers out of other people. Unfortunately, the politicians—of both parties—get away with this for several reasons. The loss is often little, an up-tick on taxes for everyone, or higher costs for many things we buy. People who lose their jobs because of government intervention are unable to follow the evidence trail to the politicians and the politically-connected winners. And the vast majority of voters are ignorant of basic economics and not paying much attention. That makes them easy to hose by the political class in government, unions, business and law.

Here’s where I’m supposed to give you the solution, but damned if I know what it is. I think I’ll just have a few beers. Maybe I can get “too big to fail.”

Robert A. Hall is a Marine Vietnam veteran who served five terms in the Massachusetts senate.

3 comments:

I do not know why Obama bailed out big business instead of the people. If he would have empowered the average citizen, then the citizens would have had the choice to choose who to bail out. I read an e-mail that recommended that every person in the workforce over 55 be given the option to leave the workforce and receive 1 million dollars. If they opted for the 1 million dollars and early retirement there would be a few conditions:

1st They may not rejoin the workforce.This would have created millions of job openings and the un-employment rate would less than zero. It would also mean the welfare would be near zero.

2nd They must buy a home to be their primary residence or pay off their existing mortgage.This action would take care of the failing housing market as well as bail out the banks on our terms.

3rd They must buy a new American made car.This would also help stimulate our economy and we would not be in the mess we are currently in.

My Dad: 3 war veteran Marine.He now rests at Arlington.He would have really enjoyed your blog.In his honor I will continue to follow your writings and I will continue to forward it to my friends.Dims..or Republicans.Thank You

What does the Constitution say about the elite Congress members, the so-called representatives of "We the (American) People", creating extreme perks and benefits for themselves that "WE..." are not entitled to receive? Why, since they represent US, aren't they required to live under the same limited hourly income, health care and retirement benefits of the average American? Our representatives? What a joke!